Unless your parents are wealthy or you quality for a full ride or something close, the days of picking a school because that is the school you always wanted to go to are gone.

The class of 2014 and beyond now has to prepare a college value plan. What classes are you going to take online that enables you to get the most credits for the least cost. What classes are you going to take at a local, low-cost school so you can get additional credits at the lowest cost.

A major hurdle is that this requires “the smart student who cares about getting their money’s worth from college” to exercise “personal discipline”.

Then, with your freshman and sophomore classes out-of-the-way, you can start to figure out which school you would like to transfer to , or two years from now, which online classes you can take that challenge you and prepare you for the areas you want to focus on. If you have the personal discipline you may be able to avoid ever having to step on a campus and graduating with a good degree and miracle of miracles, no debt.

For the smart student who cares about getting their money’s worth from college, the days of one school for four years are over. The days of taking on big debt (to the tune of 1 TRILLION DOLLARS as I write this ) are gone. Going to a 4 year school is supposed to be the foundation from which you create a future, not the transaction that crushes everything you had hoped to do because you have more debt than you could possibly pay off in 10 years. It makes no sense.

Slackers without wealthy parents do not fare well in this scenario.

Cuban still believes in college.

College is where you find out about yourself. It’s where you learn how to learn. It’s where you get exposure to new ideas. For those of us who are into business you learn the languages of business, accounting, finance, marketing and sales in college.

The question is not whether or not you should go to school, the question for the class of 2014 is what is your college plan and what is the likelihood that your college or university you attend will still be in business by the time you want to graduate.

He compares the newspaper business to higher education, and he sees a shakeout with schools that do not adapt falling by the wayside.

The newspaper industry was once deemed indestructible. Then this thing called the internet came along and took away their classified business. The problem wasn’t really that their classifieds disappeared. It was more that they had accumulated a ton of debt and had over invested in physical plant and assets that could not adapt to the new digital world.

For newspapers, higher education, and many other industries, the old ways no longer work.

Inflation has been tame in recent months. However, the one thing we can be certain about is this: Increases in inflation will have a painful effect on lower income households, those on fixed incomes, those with higher ratios of transportation costs, college tuition and any household whose discretionary spending is more dream than reality.

(Notice that both college and apparel costs follow a pattern coinciding with seasonal volatility.)

As explained by Doug Short, with its recent quantitative easing “the Fed has been trying to increase inflation, operating at the macro level”. Here are his comments on inflation in the higher education sector.

The BLS weights College Tuition and Fees at 1.695% of the total expenditures. But for households with college-bound children, the relentless growth of tuition and fees can cripple budgets. Often those costs get bundled into loans that saddle degree recipients with exorbitant debt burdens. Consider the following numbers from the CollegeBoard.com website:

Public four-year colleges charge, on average, $8,240 per year in tuition and fees for in-state students.

Public four-year colleges charge, on average, $20,770 per year in tuition and fees for out-of-state students.

Private nonprofit four-year colleges charge, on average, $28,500 per year in tuition and fees.

Of course, Mr. Bernanke would point out that, with a healthy dose of Core Inflation (extended of course to wages), those debt-burdened college grads will pay down the loans with inflated dollars.

Higher education and healthcare (Eds and Meds) are two areas of our economy that share a recent history of soaring costs outpacing inflation. Another common feature of these two sectors is a high reliance on other people’s money.

Both sectors have consistently been creating new jobs.
As reported by Derek Thompson in The Atlantic, healthcare and education are the only major job sectors that have experienced net positive growth during the last five years, a period that started two years before the “Great Recession Trough”.

If the health care cost crisis has long been known, the public is just waking up to the crisis in higher education costs. Skyrocketing tuition has driven the cost of many colleges through the roof. This traditionally didn’t bother students, who were assured that a college education the key to a good job that would easily allow loans to be repaid. In a global age where even knowledge economy jobs are subject to offshore competition, and a recession that’s kept many young people — including many now deeply in debt — unemployed or underemployed. There is now about $1 trillion of it outstanding, much of it non-dischargeable in bankruptcy….

Regardless of how it plays out, when you look at spending in aggregate in America, it’s clear increases in health care and higher education spending cannot keep increasing at current rates. This means that it just isn’t possible for all the cities out there dreaming of eds and meds glory to realize their dream. America simply can’t afford it.

There is an opportunity here. I would be extremely bullish on innovations that produce productivity gains in the Eds and Meds sectors. I recently listened to this HBR Ideocast discussion with Robert Kaplan, the Harvard Business School professor best know for developing the Balanced Scorecard. Kaplan is now turning his considerable intellect toward the problem of cost-containment in healthcare.

What the key insight? Measuring how much patient treatment actually costs–to date, there has been almost no sophisticated cost accounting in healthcare. Most of the brainpower has gone to dealing with (and maximizing) third party reimbursements. Under Kaplan’s system, fortunately, we can actually identify the points in the system that cost way too much and thus begin the reengineering process.

The same thing may soon be happening in higher ed. Another Harvard Business School professor, Clayton Christiansen, who authored the renowned business book, The Innovator’s Dilemma, recently co-authored a letter that called for colleges and universities to quit chasing prestige and start focusing on innovations that improve educational quality without increasing price. Remarkably, the letter was included in a mass mailing by the American Council of Trustees and Alumni — going to 13,000 trustees! See Inside Higher Ed, Distruption’s Strange Bedfellow, July 12, 2102. Another Insider Higher Ed story suggests that this may be the true faultline driving the University of Virginia controversy. See Disruptive Innovation: Rhetoric or Reality?, June 26, 2012.

When it comes to getting students into college (and prepared to succeed there), school counselors have a unique vantage point — seeing firsthand the factors that hinder their students from moving forward. A national survey of counselors, being released today by the College Board, finds that these counselors generally think their schools are not succeeding in the areas that the counselors believe are most important to promote student advancement.

Total enrollment at American colleges and universities eligible for federal financial aid fell slightly in the fall of 2011 from the year before, according to preliminary data released Tuesday by the U.S. Education Department’s National Center for Education Statistics.

The data from the department’s Integrated Postsecondary Education Data System show that 21,554,004 students were enrolled in fall 2011, down from 21,588,124 in fall 2010. While that drop is smaller than two-tenths of one percent, it is the first such dip since at least 1996, according to officials at NCES.

In many ways the result is not surprising; college enrollments boomed in the late 2000s, as they often do during recessions, as workers lost jobs and sought to retool or opted to continue their educations because they didn’t like their prospects for employment.

So it’s possible that enrollments are leveling off (and shrinking slightly) now because the economy had begun rebounding enough by fall 2011 that some of those who had flocked to higher education during the recession began finding jobs. It’s also possible that college tuition levels — which have continued to rise in recent years, driven in part by cutbacks in state support and other traditional sources of colleges’ revenue — are pricing more students out of higher education.

Possible impact on ‘completion agenda’

Whatever the reasons, the data — if they persist — could pose a problem for the many policy makers and advocates seeking to increase higher education attainment. While many of those promoting the “completion agenda” are focusing on improving the performance of students who are already in college, they also strive to increase the level of college-going, particularly for those historically underrepresented in higher education.

“My impression of the Conference of the Society for Neuroscience in New Orleans. There are thousands of people at the conference and an unusually high concentration of unattractive women. The super model types are completely absent. What is going on? Are unattractive women particularly attracted to neuroscience? Are beautiful women particularly uninterested in the brain? No offense to anyone..”

This reminds me of the popular University of Chicago slogan: “University of Chicago: Where the squirrels are cuter than the girls”

During my early years working in the oil fields, many of us laughed at this 1978 letter to Ann Landers from the wife of an oil geologist who wrote to complain about her husband having to train a new female scientist.

My husband is a geologist for a major oil company. Recently he had to take a young woman geologist out to an oil well to train her. They were together constantly for three weeks, traveled thousands of miles alone in the car, ate all their meals together, even slept out on the rig.

I’m not worried about the physical attraction, because most women geologists are so ugly they could go lion hunting with a switch….

You can either “ration” health care or you can “ration” education (and all other social spending). Take your pick.

The basic challenge—this is hardly news—is that America is aging and, as a result, is spending a lot of money on healthcare and retirement expenses. These expenses will go up and up in coming decades; they’re built into our demography. Unless economic growth can outpace the cost increase, however, that means less money for everything else—education included.

So let’s say you want to protect the education budget and other investments in the young—in the future. The first thing you need to do is constrain public outlays for the old—which mostly means holding the line on healthcare spending. And the second thing you need to do is encourage maximum economic growth. Get both of these things right and you avoid Armageddon.

Now hold on, you say, there are other options. You can go after the defense budget. You can raise taxes on the rich. That’s true, and these might help at the margins, at least for a while. But as the chart below shows, defense spending is hardly putting pressure on education spending—healthcare is. And as many economists will tell you, if you tax the rich too aggressively, you’ll drive down economic growth. You might slice the pie more evenly but a smaller pie means less for everyone. (And taxing the rich won’t raise nearly enough revenue, anyway.)

“The two biggest items of every state budget are Medicaid and education,” Senate Minority Leader Mitch McConnell, R-Ky., told IBD recently. “As the Medicaid mandate rises, the educational funding declines. That is passed on to universities and they raise tuition in order to make up for it.”

Students who face little chance of getting into an Ivy League school or select liberal arts college (Williams or Amherst in the East, Pomona in the West) are increasingly asking: why should my family pay $30,000 to $50,000 a year (the exact amount unknown at the time of application because of uncertainties arising from massive price discrimination in the form of so-called “scholarship” aid) to go to a mid-quality private school when for somewhat less, say $20,000 to $30,000 a year, I can go to a top public flagship school of roughly equal quality?

Wealthy families who can easily afford to give their children the full college campus experience may still pay the big bucks, but more alternatives are becoming available for others.

Amongst students who are still poorer academically as well as financially, the lure of borrowing huge amounts to finance an otherwise financially unsustainable college education is declining. Too many college students are ending up with relatively low-paying jobs unrelated to their field of study. Benefits of attending college are falling, costs are rising. For some, the decision may be to “just say no” to college altogether. For others, demand has become highly price elastic: the substitution may be to go to a community college or a for profit school’s certificate program rather than the mid to low quality four year state school.

Elite colleges will continue to hold their value.

That is why I feel pretty safe in predicting that Harvard, Stanford, Duke and Northwestern will be doing fine 10-20 years from now, cushioned also by their large endowments. But I am far less sanguine about the poorly endowed liberal arts college and state university with a so-so national reputation. The Law of Demand is going to hit these schools with a vengeance as increasingly price sensitive customers look for cheaper substitutes.

A big question is how employers will view these new alternatives. Will they value a certificate from an online school the same as a four-year degree from a mediocre private college? But yeah, elite colleges and good affordable state schools will continue to do well.

There should have been a follow-up question asking exactly how the president should accomplish this. Improving the nation’s public schools, considered important by 83% of respondents, would probably help make college available to more students, but I’m doubtful there’s very much the president can do in that regard.

Making college education “affordable and available” was viewed as “extremely important” by 38% of Obama supporters and by 22% of Romney supporters.

While acknowledging that not everyone is cut out to “debate the big ideas in literature and in politics”, Hoffman conversely maintains that “we need a much stronger set of academic demands up to age 16”. Amen to that! Since we now seem to have few students able either to intelligently debate the big ideas or write a coherent paragraph, our system might be failing us on both counts. The least we should aim for is a higher percentage of citizens who are self-supporting and able to participate fully in our democracy.

Perpetuating class and racial divisions?

One stumbling block to reinvigorating the high school vocational track is the criticism that doing so perpetuates class divisions, promoting vocational education as an option only for working class or minority children. Hoffman responds by pointing to the European experience and expressing a pragmatic assessment of our present situation.

… Income inequality is much greater in the United States than in European countries. There is much greater mobility in the European countries than here. Secondly, my view is that I would much rather have a 3 percent youth unemployment rate and most young people having a job, than have the bifurcated system we have in the United States, [in which some kids go to four-year college, and the rest face a 22 percent unemployment rate].

I’m not sure about Hoffman’s claim that income mobility is higher in Europe than here, but in any case I am more interested in her argument that we should be looking at policy ideas that have a realistic chance of improving our dire unemployment problem. I just don’t think we can afford to waste time with romantic ideas about how everyone one of us should aspire to get a bachelor’s degree.

My experience

I am the product of a vocational high school education. In my last two years of high school, I participated in DECA (previously known as Distributive Education Clubs of America). The program has morphed into something slightly different, but back then it was a way for a high school students to spend part of the day in the classroom while working at a paid job in the afternoon. We received classroom instruction in various job skills and took part in competitions against other schools.

There were various reasons why I ended up in DECA instead of in a traditional college prep track, but mainly it was for the money. As it turned out I did attend college right after high school graduation, but was handicapped by gaps in my high school education. It was only through my perseverance and aptitude that I managed to get my college degree in a STEM field.

Vocational high school could be a better option for many different types of students.

While it might be dangerous to extrapolate from my experience, I can see how disadvantaged and/or academically weak students could benefit from choosing a high school vocational education. Several possible outcomes are likely for these students. One is that they would start working right after graduation at a job that pays a living wage, enabled by training and experience gained in high school. That could be followed later by postsecondary training, either vocational or traditional college. Or they might go on to higher education directly after high school, although perhaps only strongly motivated students would opt for the traditional four-year college experience. In any case, vocational high school could be a better option for different types of high school students.

This comparison between higher education and the newspaper business seems apt.

The Higher Education Industry is very analogous to the Newspaper industry. By the time they realize they need to change the costs to support their legacy infrastructure and costs will keep them from getting there.

Easy loans

Its far too easy to borrow money for college. Did you know that there is more outstanding debt for student loans than there is for Auto Loans or Credit Card loans ? Thats right. The 37mm holders of student loans have more debt than the 175mm or so credit card owners in this country and more than the all of the debt on cars in this country. While the average student loan debt is about 23k. The median is close to $12,500. And growing. Past 1 TRILLION DOLLARS.

We freak out about the Trillions of dollars in debt our country faces. What about the TRILLION DOLLARs plus in debt college kids are facing ?

The point of the numbers is that getting a student loan is easy. Too easy.

You know who knows that the money is easy better than anyone ? The schools that are taking that student loan money in tuition. Which is exactly why they have no problems raising costs for tuition each and every year.

Purpose of college

As far as the purpose of college, I am a huge believer that you go to college to learn how to learn. However, if that gaol is subverted because traditional universities, public and private, charge so much to make that happen, I believe that system will collapse and there will be better alternatives created.

Reading this on Cuban’s blog, I was amused by his writing errors. I’m sure he writes quickly and eschews basic spell checking. Somehow, it’s entertaining to see “its” and “thats” with missing apostrophes in a billionaire business magnate’s writing. The lesson might be that perfect grammar and correct spelling are not always essential for good communication. There are probably a few other self-made billionaires who can’t be bothered to know when to use “it’s” instead of “its” *.

* Actually, I think the more common mistake is to add an unnecessary apostrophe.

“There are 80,000 bartenders in the United States with bachelor’s degrees,” Vedder said. He says that 17 percent of baggage porters and bellhops have a college degree, 15 percent of taxi and limo drivers. It’s hard to pay off student loans with jobs like those. These days, many students graduate with big debts.

Richard Vedder and others argue that it’s not always the college education that causes college graduates to have higher lifetime earnings than non-graduates. Rather, it’s that people who go to college are more disciplined and smarter than those who don’t.